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Forex: EUR/GBP rallies on EMU Services PMI, waiting for UK data

Better than expected figures in the German and French Markit Services PMI are boosting euro sentiment against its counterparts. The final reading of February PMI Composite in the Eurozone only eased from 48.6 to 47.9 (consensus of 47.3). The EMU services PMI had the same values. The EUR/GBP rallied to 0.8633 high.

In Germany, data only eased from 55.7 to 54.7 (consensus of 54.1). In France, data surprised by moving higher from 43.6 to 43.7 (consensus of 42.7).

The final reading of February Services PMI in Spain came in even lower than expected, from 47.0 to 44.7 (consensus of 46.0), while it came in line with consensus in Italy (down from 43.9 to 43.6).

The EUR/GBP will also react to the UK Services PMI figure, due to be released soon. “After the weakness in both the manufacturing and construction PMIs already this month, we think that if the services PMI comes in below our forecast of 50.5 (market 51.0) then the BoE will increase QE by at least £25bn at this week’s meeting (in addition to the £6.6bn reinvestment from the APF’s March 2013 redemption), as the economy would no longer be showing the “muted pace of expansion” that it had assumed, and the Feb MPC vote was already close with 3 of 9 members (including Gov King) voting for QE”, wrote TD Securities analyst Alvin Pontoh.

UBS analysts are bullish: “Resistance is at 0.8696 ahead of 0.8831”, wrote analyst Gareth Berry, pointing to a limited downside with support at 0.8576 ahead of 0.8535.

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